Major Alert for European Dividend Investors

Currently, Europe is almost in full lockdown and an epicenter for the outbreak. The full extent of the economic fallout due to the coronavirus is still unknown. The equity and bond markets still face considerable risks. We see and expect more downgrades, suspended dividends, and buy-back programs and regulatory changes to come.

Especially dividend focussed investors should monitor their portfolio closely. The European Central Bank (ECB) and other regulators are “advising” to postpone dividend payments.

European Banks will freeze dividends

On Friday evening the ECB updated its recommendation to banks on dividend distributions. To boost banks’ capacity to absorb losses and support lending to households, small businesses, and corporates during the pandemic, they should not pay dividends for the financial year 2019 and 2020 until at least 1 October 2020. The measure is expected to keep €30bn in the system.

As a result of the ECB announcement ABN AMRO, ING Bank and KBC Bank already announced today that they will skip their dividend. Banco Santander announced it would consolidate any dividend payment from 2020 into a single payment in May 2021. As a result, European banks are trading 4 to 9% lower.

Also, the UK banks Barclays, Lloyds, NatWest, Standard Chartered and HSBC confirmed on Tuesday (31-Mar-20) that they will not be paying out dividends in 2020.

French dividend stocks also at risk

The French government is requesting companies with state ownership not to pay a dividend. This will certainly have an impact as well. Some of the French companies with a government stake are:

Air France – KLM

EDF

Airbus

Engie

Safran

Thales

Renault

Eramet

Also, Unibail-Rodamco and Randstad skipped their dividend payment already. A trend can be seen towards a dividend freeze for many European stocks! This trends seems to be stronger than in the US.

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